Commercial real estate bottom???

[John_in_NC]

That is what they are reporting. I think I trust the minds in this forum more, what do you think?

http://seekingalpha.com/article/199903-commercial-real-estate-appears-to-have-found-its-bottom

http://www.usatoday.com/money/economy/housing/2010-04-20-commercialrealestate20_ST_N.htm

[jfpen]

That is what they are reporting. I think I trust the minds in this forum more, what do you think?

http://seekingalpha.com/article/199903-commercial-real-estate-appears-to-have-found-its-bottom

http://www.usatoday.com/money/economy/housing/2010-04-20-commercialrealestate20_ST_N.htm

I'd be very interested to find out if the money created in the name of "quantitative easing" was used to buy up commercial notes as was done with residential. I think if they were, we're going to see more downside. 

[fdjake]

The answer to your questions lies in the RESIDENTIAL HOUSING MARKET....

Let me explain...

As in EVERY RECORDED RECESSION in HISTORY property values for RESIDENTIAL Real Estate soften or even DROP (like we just experienced)   Eventually that MARKET SENTIMENT reaches the COMMERCIAL REAL ESTATE market.....As consumers experience the recession FIRST HAND, they pull in spending....This effects retailers (HUGE users of commercial real estate) but it also effects their SUPPLY SYSTEM......Trucking companies that rent commercial warehouse space,
parts companies that supply parts to those trucks also rent COMMERCIAL PROPERTY....and on and on down the line....Even OFFICE space is effected as LAWYERS do fewer closings, Doctors see fewer patients (as health benefits are lost due to job loses)  and it just keeps going.

BUT..........The LIGHT at the end of that TUNNEL comes from the very source that STARTED the drop in the first place!!!

RESIDENTIAL PROPERTY....

I can speak from my area of the country first hand.....

I wrote for MONTHS and MONTHS on this site 3 years ago that we were about to see a CRASH in real estate values...I based that on what I was seeing LOCALLY and on 20+ years of investing experience.  The residential market here was DEAD.....It ISN'T ANYMORE!!!

NOW.....I see residential housing sales INCREASING (these are comfirmed FACTS, not just OPINIONS)......People are BUYING HOUSES again....They are ALSO buying AUOTMOBILES, FURNITURE, CLOTHING, They are SHIPPING these items via UPS and FEDEX and those companies earnings are up 30+%.

The TURN has started......It started with RESIDENTIAL HOUSING....At some point COMMERCIAL PROPERTY will do what it has ALWAYS DONE....

Follow that lead!!!

The economy is starting to MOVE.....It's getting harder and harder to DENY this.....Banks ARE lending....If you have good credit...It's VERY EASY to obtain financing.....

John, you just purchased a COMMERCIAL PROPERTY and FINANCED  a portion of IT!!!  In December of 2008.....THAT WASN'T HAPPENING.

Your TIMING will prove to be PERFECT......WATCH!!!

[propertymanager]

Of course, the answer is no - the commercial real estate market has not bottomed.  The stock market has not bottomed.  The economy IS going to collapse.

All it takes to come to that conclusion is a LITTLE logic.  Let's look at the facts.  This country has a MOUNTAIN OF DEBT that is increasing every day.  School districts are broke across the country.  Cities are broke across the country.  States are broke across the country.  The Federal Government is broke.  Social security is broke.  Medicare is broke.  Medicaid is broke.  Freddie and Fannie are broke.  With all that, President Bozo has just signed the largest entitlement in history - Obamacare for everyone!  That, of course, followed the idiot Bush's passing the Medicare Drug Plan - another huge entitlement!

The government has nationalized banking (through bailouts and regulation).  Big banks made a miraculous recovery from almost bust a year ago to a profit this year!  Why?  Because the FED give them money they printed out of thin air for FREE and the banks loaned that money to the treasury at 3% interest.  In other words, the taxpayer GAVE the banks money (THERE IS NO PROFIT)!  The government has nationalized a large part of the auto industry.  The autos made a miraculous recovery!  Why?  Because the TAXPAYER GAVE THEM MONEY through cash for clunkers and direct bailouts (again, money printed from thin air).  The housing industry has seemingly "bottomed" at a very low level.  Why?  Because the taxpayer GAVE THE HOUSING INDUSTRY MONEY through the homebuyer programs (again with money printed from thin air).  See a pattern here?  THERE IS NO RECOVERY!

I could go on and on, but the point is that this is all an illusion; a scam; a ponzi scheme.  There is no recovery.  There is a postponement of the inevitable and a worsening of the coming collapse.

The only question is how the collapse will unfold.  Will the government drastically raise taxes and cause the collapse?  Will hyperinflation run rampant and collapse the economy?   That's the hard question to answer.   However, the truth is that the bill for all this wreckless spending (over decades) has come due and the result will be pain that hasn't been seen in this country in several generations.

[fdjake]

OR..................................

Could all that GOVERMENT INTERVENTION actually do what it was intended to do...Which was.....

STOP the PANIC of late 2008 when BANKS wouldn't loan money OVERNIGHT to other BANKS!
Remember the MILLIONAIRE in Conn. that COULD NOT get a $600,000 mortgage with an 800 credit score and $1,000,000 in CASH for a down payment on a home????

Apparently, even without CASH FOR CLUNKERS car sales rates are HIGHER NOW (2010) than when the goverment was offering the incentives (2009).  THAT should be telling you something about UNDERLYING SENTIMENT.

Home sales are UP.......Sure it helped that the Goverment had a TAX CREDIT.....But those credits helped EVERYONE from the FIRST time home buyer to the MOVE UP BUYER that needed the 1st timer to buy his house.
the real test will be NOW.....No incentives....My guess is the same thign happens with HOUSING that happened with CAR SALES.....Incentives GONE....SALES STILL HIGHER!!!

UPS and FEDEX.....earnings UP HUGE......30+%  THAT is a undeniable economic indicator.  Those shipments are SALES!!!!

And now John Paulson is a "RAGING BULL" on Housing and the ECONOMY!!!

But MIKE says "HE'S RIGHT"  so I'm gonna do what MIke is doing.....BUY GUNS, CANNED FOOD, and NOT a SINGLE Property during the biggest SALE in Real Estate HISTORY!!!

I LIED.......

I'm doing the exact OPPOSITE and have made more money in the first 4 months of this year than the average American will ever SEE!!!

[propertymanager]

And now John Paulson is a "RAGING BULL" on Housing and the ECONOMY!!!

I imagine that he was a "raging bull" on Housing and the economy while he was selling CDOs to ignorant investors.  Of course, in reality, he was SHORTING the same CDOs.   It would be interesting to know if he was secretly shorting the economy while he's openly pumping it.

[John_in_NC]

Wow this was the exact conversation I was hoping for. Thanks Mike and Pete. You have no idea how great it is to have both sides presented from educated investors. The local guys here are pretty pessimistic. Last week I was chattin with a close friend who made his millions with mobile home parks. He is 55 and says this country is doomed. A few years ago I remember him telling me always go against the crowd? At 29 I am just too young to have seen enough of the cycles to call it right. I am on the V shaped side obviously, with my last purchase.Depending on how my new building plays out,  I might sell the last of my residentials, and plow it into another commercial foreclosure. There are a few coming down the pipe that look appealing. Besides, my last one was one heck of a deal. It's on the second most busiest road in the city. the 1st is I40! We found a 2008 appraisal in a filing cabinet for my newest property for 870K!! The one I bought for 190k! And that is land ONLY! I guess the highest and best use is redevelopment, not a car repair shop, so the building wasn't included in the report.

Not to ramble, if this plays out V shaped, my life is going to change greatly, diddo for the collapse(probably true for all of us). \

thanks again guys!

[Bluemoon06]

Of course, the answer is no - the commercial real estate market has not bottomed.  The stock market has not bottomed.  The economy IS going to collapse.

All it takes to come to that conclusion is a LITTLE logic.  Let's look at the facts.  This country has a MOUNTAIN OF DEBT that is increasing every day.  School districts are broke across the country.  Cities are broke across the country.  States are broke across the country.  The Federal Government is broke.  Social security is broke.  Medicare is broke.  Medicaid is broke.  Freddie and Fannie are broke.  With all that, President Bozo has just signed the largest entitlement in history - Obamacare for everyone!  That, of course, followed the idiot Bush's passing the Medicare Drug Plan - another huge entitlement!

The government has nationalized banking (through bailouts and regulation).  Big banks made a miraculous recovery from almost bust a year ago to a profit this year!  Why?  Because the FED give them money they printed out of thin air for FREE and the banks loaned that money to the treasury at 3% interest.  In other words, the taxpayer GAVE the banks money (THERE IS NO PROFIT)!  The government has nationalized a large part of the auto industry.  The autos made a miraculous recovery!  Why?  Because the TAXPAYER GAVE THEM MONEY through cash for clunkers and direct bailouts (again, money printed from thin air).  The housing industry has seemingly "bottomed" at a very low level.  Why?  Because the taxpayer GAVE THE HOUSING INDUSTRY MONEY through the homebuyer programs (again with money printed from thin air).  See a pattern here?  THERE IS NO RECOVERY!

I could go on and on, but the point is that this is all an illusion; a scam; a ponzi scheme.  There is no recovery.  There is a postponement of the inevitable and a worsening of the coming collapse.

The only question is how the collapse will unfold.  Will the government drastically raise taxes and cause the collapse?  Will hyperinflation run rampant and collapse the economy?   That's the hard question to answer.   However, the truth is that the bill for all this wreckless spending (over decades) has come due and the result will be pain that hasn't been seen in this country in several generations.

You are right about the country being broke and that there is going to be a collapse.  The problem is that the reason is not all the issues you point out.  The reason is that we don’t make anything.  There is not enough production to sustain the economy.  It is not a political problem it is an economic problem.  Bailouts or no bailouts, regulation or no regulation that doesn’t matter.  If your ship is sinking then it doesn’t matter who is the Capitan or what color you paint the walls.  You need an intact structure.  We can’t even afford to stay in space.  That means that we can’t maintain the program that gave us so many things to manufacture.  Things like Velcro, invisible braces, scratch-resistant lenses, ear thermometer, Air Jordan next generation sneakers (Shoe Insoles), cordless tools, britta type water wilters, memory foam, and antilock brakes.  Our economy can’t sustain itself if everybody is in the service industry.  Who are we servicing?  Somebody needs to make something.

You are beating a strawman.  We don’t need to strain against Obamacare, or bailouts.  We need to find a way for the USA to get back to manufacturing stuff people need.

[propertymanager]

The reason is that we don’t make anything.  There is not enough production to sustain the economy.

I agree that not making things here in the USA is a HUGE problem!  However, the solution to that problem MUST be lower taxes, lower regulation, lower wages, lower benefits, and other things that will encourage entrepreneurs to once again build things here.  Without being competitive, we will only continue shipping more jobs and more manufacturing overseas.

[Bluemoon06]

lower taxes, lower regulation, lower wages, lower benefits, and other things that will encourage entrepreneurs to once again build things here.

I am half and half with this.  I don’t like the lower wages lower benefits part of it.  We can’t get caught in a race to the bottom.  We won’t win that one.  We can’t out Mexico Mexico.  Henry Ford paid his people $5 per day wages in 1914 which astonished the world because it was double what most people were making.  He said he wanted his workers to be able to afford the car they were building.  America is all about more and better.  We earn more so we can live better and buy the best stuff in the world (and rent my houses).
 
I agree that we need to cut taxes to stimulate entrepreneurship.  I believe we may not need lower regulation that is what got us into the banking mess.  What we do need is correct regulation.  Some of the regulation needs to be adjusted to improve competition.  I think that if we are in an industry and our environmental laws are significantly different from our main competition country’s laws we need to adjust our regulations to compensate for it..

[fdjake]

OK.....

So IF all it takes is to be BUILDING or MAKING things in this country....

How did the recession of the 1970's occur????
Or the 1980's
Or the 1990's
Or the 1960's
Or the DEPRESSION of the 1930's

We were BUILDING EVERYTHING in this country THEN.....What happened???

The PLANET is becoming SMALLER......That's what none of these DOPEY DOOMS DAYERS SEE.....It's not about WHAT we BUILD HERE anymore....It's ALWAYS BEEN about what we INVENT HERE!!

Computers
Medical devices
Communications systems
Advanced construction products
Intellectual Property like Movies, Music, Clothing lines
Petroleum processing equipement
Deep water drilling technology

As the GLOBAL economy EXPANDS we USE low cost MANUFACTURING COUNTRIES to BUILD these items....In a lot of cases they make just PARTS...Which are then ASSEMBLED in the USA by highly trained people.
If THAT process doesn't occur here....Then the ENTIRE MANAGEMENT structure along with all the UPPER LEVEL job growth takes place in the USA.

The United States of America has become the BUSINESS MANAGER to the PLANET....

Sure we farm out the PHONE CENTER JOBS to INDIA.....But the BUSINESS is run FROM AMERICA by AMERICANS.....That has been done and will CONTINUE to be done for ONE simple REASON.....

AMERICAN LAWS.....

This country PROSPERS more than any other because it's BUSINESSES and PROPERTY are protected by LAWS......It's not MEXICO here where corrupt COPS take your KIDS and hold them for RANSOM while the Goverment sits on its hands.

John.....

People need to get places.....They need CARS to do that....CRIPES...even in MIKES MAD MAX world they STILL needed CARS!!!!   Hey.....THAT'S IT!!!!   

A combination GUN SHOP and AUTO REPAIR BUSINESS!!!

You could call it DOOMS DAY AUTO CARE or MADD MAX's Gun Shop and ESCAPE VEHICLE REPAIR FACILITY!!!!

You'll do GREAT on that BUILDING.....The same BUILDING almost all respondants here told you NOT TO BUY!!!!!!!

There's your CONTRARIAN INDICATOR!!!!!!    If I ever saw one!

[propertymanager]

You'll do GREAT on that BUILDING.....The same BUILDING almost all respondants here told you NOT TO BUY!!!!!!!

There's your CONTRARIAN INDICATOR!!!!!!    If I ever saw one!

I'm afraid that you're following in Obama's footsteps and re-writing history here FDJake.  I don't recall anyone telling him not to buy the property.  Personally, I recall telling him to do his own due diligence and not to get caught up in the hype - a far cry from saying "don't buy the property".

Whether he'll do great on the building or not remains to be seen.  I certainly hope so and obviously buying any property at a huge discount is a great start, but whether he'll do great, or not, depends on the economy and demand for the property (just as it does for every other property).

[fdjake]

RE READ the original POST....

He was told NOT TO BUT IT!

And maybe it's just ME....But finding a 2008 appraisal for over $800,000 on this property leads me to believe Johnny Boy will do VERY WELL on this investment.....V E R Y   W E L L !!!!

[Bluemoon06]

OK.....

So IF all it takes is to be BUILDING or MAKING things in this country....

How did the recession of the 1970's occur????
Or the 1980's
Or the 1990's
Or the 1960's
Or the DEPRESSION of the 1930's

We were BUILDING EVERYTHING in this country THEN.....What happened???

Recessions (depressions) are a function of the natural business cycle.  Nobody is saying we can prevent recessions.  What we are saying is that we don’t have a sound economy if we don’t manufacture.  Good jobs are created by manufacturing.  There are no good jobs in the service industry.  Good jobs allow people to consume which perpetuates more jobs.

It's ALWAYS BEEN about what we INVENT HERE!!

Computers
Medical devices
Communications systems
Advanced construction products
Intellectual Property like Movies, Music, Clothing lines
Petroleum processing equipement
Deep water drilling technology

Nobody in the USA is making any money from computers, or communication systems.  Medical devices advanced construction products, petroleum processing equipment and deep water drilling equipment is manufactured here.

[fdjake]

No one in the USA is making money from computers or communications????

WRONG....

What you MEAN is no one is making money BUILDING THESE THINGS....

Take a ride out to California's Silcon Valley or Seatle......There's MILLIONS of people in this country making BILLIONS of dollars MANAGING these businesses.  The Manufacturing of these components has become a COMMODITY BUSINESS.  Cheapest producers stays in business because the product is all the same.....BUT....the MANAGEMENT of these businesses is alive and well in the USA!

As I said....

The USA is the business manager to the WORLD.....We may not physically MAKE these items anymore IN this country....But we DO prosper as a result of the BUSINESS MANAGEMENT.

Look at it like this.....

You own a landscaping company....You can either CUT all the lawns YOURSELF  and LIMIT your income to the hours in a day or you can HIRE the cheapest labor to do it for you and MANAGE a much larger operation.  Now WHO are you going to hire for these jobs.....People that need $50/hour or someone that is willing to work for $10????
The BUSINESS is going to be more profitable with the $10/hour labor....
This allows you to BUILD a new office, hire a full time account, secretaries, mechanics to keep the trucks running, managers to over see crews in the field.  Critics would say.....Sure, but YOU aren't cutting the lawns anymore...YOU are producing...And I would say....YEA.....But I'm swimming in GREEN...Just a different kind of GREEN!!!

THAT is EXACTLY what this Country is doing....We are in the process of CHANGING from a manufacturing based economy to a management based economy.  The country went through the same CHANGE during the Industrial revolution.  We WERE an AGRICULTURAL BASED economy and as that CHANGED people thought it would put an END to the country...People, business leaders, and politicians all thought NO ONE would know how to GROW FOOD ANYMORE....and the economy would COLLAPSE!!!

How'd THAT work out for the USA????

You guy's are ALL making a HUGE miscalculation....

You're making the same mistake our ENEMIES have made over and over for DECADES...

They ALL sold this Country SHORT and didn't fully understand the POWER that a GREAT IDEA or new product MEANS in this country....A country where the IDEA is KING!!!!